The Financial Accounting Standards bored issued a new standard on the 30th March. The standard simplifies how public and private companies account for share-based payments to employees.
“Both public and private company stakeholders identified a few aspects of accounting for employee share-based awards that are unnecessarily complex,”
FASB Chairman Russell Golden
Areas of employee share-based payment accounting that have been simplified under Accounting Standards Update No. 2016-09 include:
1. Accounting for income taxes: All excess tax benefits and tax deficiencies, including tax benefits of dividends on share-based payment awards is to be recognized as income tax expense or benefit in the income statement.
2. Classification of excess tax benefits on the statement of cash flows: Excess tax benefits are to be classified along with other income tax cash flows as an operating activity.
In addition, the ASU also simplifies two areas of private companies:
1. Practical expedient for expected term
2. Intrinsic value